# How to calculate discount factor for a loan?

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Video answer: Ex: simple interest discounted loan

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For example, to **calculate discount factor** for a cash flow one year in the future, you could simply divide 1 by the interest rate plus 1. For an interest rate of 5%, the **discount factor** would be 1 divided by 1.05, or 95%.

- Discount Factor Formula â€“ Example #1 We have to calculate the discount factor when the discount rate is 10% and the period is 2. Discount Factor is calculated using the formula given below
**Discount Factor = 1 / (1 * (1 + Discount Rate)Period Number)**

Video answer: Calculate the loan discount amount

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For example, to calculate discount factor for a cash flow one year in the future, you could simply divide 1 by the interest rate plus 1. For an interest rate of 5%, the discount factor would be 1 divided by 1.05, or 95%.

Discount Factor is calculated using the formula given below Discount Factor = 1 / (1 * (1 + Discount Rate)Period Number) Put a value in the formula. Discount Factor = 1 / (1 * (1 + 10%) ^ 2)

The formula is as follows: Factor = 1 / (1 x (1 + Discount Rate) ^ Period Number)

Calculate the discount rate if the compounding is to be done half-yearly. Discount Rate is calculated using the formula given below Discount Rate = T * [ (Future Cash Flow / Present Value) 1/t*n â€“ 1] Discount Rate = 2 * [ ($10,000 / $7,600) 1/2*4 â€“ 1]

The discount rate has to correspond to the cash flow periods, so an annual discount rate of r% would apply to annual cash flows. Time adjusted NPV formula: =XNPV(discount rate, series of all cash flows, dates of all cash flows) With XNPV, itâ€™s possible to discount cash flows that are received over irregular time periods. This is particularly ...

Determine the interest rate on the loan and then express it as a decimal point. So for instance, if your rate is 6.75 percent, express it as.0675. Step 2 Divide the interest rate in decimal form by 365.25 days (the extra.25 represents a quarter day to account for leap years).